Canada and Brazil are set to ask the World Trade Organization Dispute Settlement Panel to examine whether US farm support payments violate limits on the amount of subsidies WTO member states can offer domestic producers. The joint complaint asks the WTO to determine whether US subsidies paid to producers of rice, soy, and corn among other commodities, exceed the Amber Box cap for trade-distorting payments. Under the current WTO agreement, the United States cannot spend more than $19.1 billion per year on such subsidies. The complaint alleges that US spending has exceeded this cap every year between 1999 and 2005, except 2003.
In filings to the WTO, the United States says its Amber box spending did not exceed $13 billion per year between 2002 and 2005. This total does not include direct payments, which the US classifies as Green Box, or non-trade-distorting, payments. One issue the Dispute panel will have to address is whether Direct Payments do affect planting decisions and thus distort production and trade.
While the challenge provides a further reason to reform US farm support programs, the timing of the complaint will not alter the course of current farm bill negotiations. WTO dispute settlement processes are laborious and slow. The last challenge to US farm subsidies was initially filed in 2002, and the case remains essentially unresolved despite the finding that US cotton subsidies do violate WTO rules (for more information on the Cotton Case, see this previous post).
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